When considering the impact of distress costs on capital structure, which of the following facts should lead ABC Corporation to set a higher target debt ratio than XYZ Corporation (all else equal)? Multiple Choice ABC’s cash flows from operations are less volatile than XYZ’s. ABC is a computer software firm, and XYZ is an electric utility. ABC operates in a more competitive industry than XYZ. ABC’s assets have lower resale values than XYZ’s assets.
When considering the impact of distress costs on capital structure, which of the following facts should lead ABC Corporation to set a higher target debt ratio than XYZ Corporation (all else equal)? Multiple Choice ABC’s cash flows from operations are less volatile than XYZ’s. ABC is a computer software firm, and XYZ is an electric utility. ABC operates in a more competitive industry than XYZ. ABC’s assets have lower resale values than XYZ’s assets.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
When considering the impact of distress costs on capital structure, which of the following facts should lead ABC Corporation to set a higher target debt ratio than XYZ Corporation (all else equal)?
Multiple Choice
ABC’s cash flows from operations are less volatile than XYZ’s.
ABC is a computer software firm, and XYZ is an electric utility.
ABC operates in a more competitive industry than XYZ.
ABC’s assets have lower resale values than XYZ’s assets.
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